Lenovo Q4 net more than triples as corporate demand returns

By IBT Staff Reporter On 05/26/11 AT 6:56 AM

Lenovo Group Ltd, the world's No.4 PC brand, more than tripled its fourth-quarter net profit, beating forecasts on robust demand from commercial customers and making up for a slowdown in the consumer sector.

Lenovo reported a net profit of $42.13 million in the January-March quarter, up from $12.8 million a year earlier, according to Reuters calculations based on full year results.

This was better than expectations for a $36.7 million net profit, based on a survey of 23 analysts polled by Thomson Reuters I/B/E/S.

Momentum in commercial PC demand has gradually picked up, benefitting from the corporate refresh cycle, while consumer PC demand weakened due to a worsening macroeconomic environment and increasing competition from tablet products, the company said in a statement to the Hong Kong stock exchange.

The rising popularity of smartphones and tablets, such as Apple's iPhone and iPad, has eaten into PC sales by vendors such as Hewlett-Packard, but Lenovo hopes to expand its share of the mobile market with its LePhone smartphone and LePad tablet PC.

For the fiscal year that ended March, Lenovo's net profit totaled $273.23 million, also higher than a consensus forecast of $267.8 million.

China continued to be the star performer, accounting for 46.4 percent of the company's sales as it looked to smaller cities and rural areas to continue growing.

However, operating margins fell 0.5 percentage points to 5.1 percent due to higher marketing costs from the LePhone and LePad mobile products, the company said.

Like its rivals, Lenovo has been looking to mobile products as PC computers become increasingly commoditized and tablets begin cannibalizing demand, squeezing margins and hurting the bottom line of peers such as Taiwan's Acer.

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